Question

I am the owner of a retail business in Salinas. Business has been slow, and I need to terminate one of my employees. The person I am letting go is a part-time employee, and has only been working for me for six months. I want to make sure I follow all of the proper procedures for terminating this employee. What should I do?

Answer:

Based on your question, it appears that you are terminating the employee due to a slow down in business. For purposes of this question, we will assume that the employee is an at-will employee, and does not have a written or implied contract of employment. There are several procedures to be followed in terminating the employment of an at-will employee.

One of the biggest mistakes employers make is failing to pay all wages due at termination. When the employer terminates an employee’s employment, all wages earned and unpaid at the time of termination are due and payable immediately. This means that you must have the final paycheck ready to hand to the employee when you inform the employee of his or her termination. The paycheck must cover all wages earned and unpaid up to the time of termination. It must include all vacation and other paid time off benefits that the employee has accrued through the date of termination. Accrued sick leave does not have to be paid at the time of termination, unless it is your policy to do so. However, any commissions or bonuses already earned must be paid at the time of termination. If you are terminating the employee in person, you should hand the employee the final paycheck covering all wages earned. If you are not terminating the employee in person, you would mail the paycheck with the notice of termination, via certified mail, return receipt requested.

Treat the employee with respect, and inform him or her that the termination is the result of a slow down in business. Give the employee the opportunity to comment and ask questions, but be sure to maintain a business like demeanor.

If the employee has any pending expense reimbursement requests, you should process those as soon as practicable, although they do not have to be paid at the time of termination because they are not wages. Other issues that may arise relating to final pay include any loans advanced by the employer, or outstanding advances of pay. The employer is not permitted to deduct loans or outstanding advances from the employee’s final paycheck. If this is an issue, discuss a repayment plan with your employee, and ask him or her to agree to a repayment plan in writing.

Request that the employee return any company property to you. This includes return of keys, employee handbook, tools and equipment, or any other company property that you provided to the employee.

If you have 2-19 employees, your terminated employee may be eligible for CAL COBRA benefit continuation. For employers with 20 or more employees, the federal COBRA law will govern continuation of insurance benefits. You are required to provide your employee with information about CAL COBRA or COBRA benefit continuation. You should also notify the medical/dental insurance carrier of the employee’s separation of employment immediately, so that COBRA forms are promptly sent to the employee.

You are also required to provide a written notice to the employee informing him or her of the change in the employment relationship, and provide form DE 2320, the “For your Benefit” brochure to the employee. These forms are available on the EDD website,
http://www.edd.ca.gov/uirep/de2320.pdf
and http://www.edd.ca.gov/taxrep/de44-04.pdf, (page 91).

Finally, inform the employee about your policy for giving employment references. Generally, employers provide the dates of employment and job title, but do not provide additional references without a written release from the employee.
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